lbs1989: [Long market/risk post] I like russwinter's list
but only as a speculation on gold, not what I would call an investment. Not to debate prevailing expectations, but just to price risk, ask what chance you assign to bleak scenarios--not the kind in which gold triumphs, but in which it stays flat or even down from today's level, so you can't trade for gains.
For example, I'd assign about a 33% probability of gold trading in a ~$250-275 range for the next year or two via the following: (1) continued good aim of producers at their feet with their hedging rifles, which is crucial to current supply #s; (2) CBs supplying liquidity (both metal and paper), as none other than Easy Al has said they will do, which continues or at best gradually unwinds the carry trade until the Fed raises rates later and possibly revives it; (3) the CPI not following the monetary aggregates upward as the type of warning the larger market might heed that the Fed is getting behind the curve on inflation; all causing (4) continued disincentive to buy gold for investment.
Whatever percentage you assign to the flat or lower gold scenario, and whatever the reason, argues for that much investment $$ outside gold shares, or at least for buying a royalty company like Franco Nevada that will survive a long flat or down period better. It will bounce back rapidly at higher gold prices without being weighted with capital expenditures in restarting shut production or gearing up new production on its properties. Juniors can fold or go to pennies. No one buying them in 1996 thought it would happen then, either. The smaller a company's margin the less the fall in gold price needed to tank its stock.
So $50k x 33% = ~$17k I wouldn't be putting in juniors, or at least not juniors that will only survive or flourish with gold moving well above $275 over the next 2-3 years. I'd put that money over time in QQQ or DJX or funds tracking them, especially if that is all the investment portfolio your sister has. |
